CUSO Financial Services and Infinex Financial Group are planning to not only lower minimums and adjust pricing on advisory accounts but are making arrangements to partner with digital advice providers – all in an effort to serve the widest range of customers in the new regulatory environment, including small investors with modest savings.

With the expected shift to fee-based advisory business, firms want to make sure that their advisory offerings are competitive in terms of both their account fees and minimums.

Serving a Wider Audience

Infinex, for instance, is in the process of lowering its minimum balance requirements on all of its advisory products so that it "can offer advisory products to a wider audience," says Stephen Amarante, president and CEO of the broker-dealer. He noted that Infinex is rolling out more tiered pricing to appeal to a broader range of clients, despite the fact that the firm's pricing is already extremely competitive, especially on the lower end.

CUSO Financial is also looking into changes to its advisory offering with a view to helping smaller clients who don't have assets to meet program minimums. "We have been looking at tweaking programs and developing new programs that will have lower minimums and lower fees to work best with this segment of our clients," says Peter Vonk, CUSO's chief compliance officer and executive vice president of business services.

Robo Technology

For the smallest customers, both CUSO and Infinex are planning to use robo technology platforms. An investor who is adding just $50 a month to his 401(k), for example, might be better served under a digital platform, Amarante notes. While these smaller accounts would be served using automated technology, they would still be managed by an advisor, he says.

CUSO is in discussions with several digital advice providers and anticipates having a platform implemented long before the final rule becomes effective. "We expect to have solutions to continue to meet everyone from the ultrahigh-net-worth to the folks who are just starting out on their investment journey," Vonk says.

Interestingly, LPL also is developing a digital advice capability, even though it did not say so in its recent announcement about its preparations for the new rule. "We are partnering with a third-party technology provider to design an advisor-based solution, which would be leveraged by our advisors and institutions as another tool to serve investors and members," LPL said in a statement.

Yes to BIC Exemption

Unlike LPL, both CUSO and Infinex disclosed that they are planning to take advantage of the Best Interest Contract, or BIC, exemption. The exemption will allow financial institutions to continue charging commissions for advice on retirement accounts provided they comply with rigorous disclosure requirements.

Infinex is not only working with product partners to comply with the anticipated disclosure requirements but is also evaluating its product offerings to determine which ones will use the exemption. "We're recognizing that under BIC, we'll need to have a more limited product set," says Amarante.

While CUSO anticipates using the exemption, it is hoping for some relief to the extensive disclosure requirements. It is also looking for more clarification from the Labor Department as to the grandfathering of existing accounts, as is Infinex.

"We are hoping to be able to operate under the BIC exemption, and many of my colleagues at other firms are hoping the same. But until we have the final rule, you can't say definitively if that will be possible," says Vonk.

Education Is Key

As part of their preparation efforts, both CUSO and Infinex have been educating advisors on the proposed rule and what the changes mean for them. CUSO has held conferences and continuing education classes and issued numerous FAQs and overviews of the rule.

Infinex's educational efforts have focused on raising advisors' knowledge of technology products, which it believes will be critical in the new regulatory environment. The firm has also drilled advisors on what it means to be a fiduciary and how to turn the anticipated ruling into an opportunity.

Neither of the two firms seemed surprised by LPL's strategy to deal with upcoming regulatory changes. "Everybody will be wanting to find the most appropriate way to service the smaller investor and I think what LPL announced is what many firms are working on," says Vonk.